E-Mini S&P500 Futures Volatility Forecast (06/06/2011)

E-Mini S&P500 futures have been clearly hit by the panic which swept away equity markets. In particular, the market opened at 1,330 rose to 1,344 it then plunged to 1,313 on Wednesday and it closed to 1,295 on Friday.

The current volatility is 1.18% (18.7% in annual terms) and the TGARCH curve is now displaying a robust upward sloping curve which highlights that the down move of the price action was constant and far from being over.

The disappointing figures that have been released in the Non Farm Payrolls clearly pushed away many investors which are now looking for safer ways to invest their money and diversify their portfolios; occurrence that obviously augmented the selling pressure.

The conditional variance should probably augment over the next trading hours, although it already touched a very high level, and such a phenomenon will obviously drag E-Mini S&P500 futures down.

Furthermore, if we consider that both the VIX and the VXN are likely to remain at the same level and therefore to not retrace, the bearish scenario for this market seems to be the more likely to occur.

The HyperVolatility team is bearish E-Mini S&P500 futures because the oscillation rate did not show any recovery sign and the bad macroeconomics news are going to influence negatively many market participants.

We will place some shorts as soon as possible because we believe that futures prices should plummet to 1, 265 – 1,270 by the next Friday.

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